Ordinance on Collective Investment Schemes

Transcription

1 English is not an official language of the Swiss Confederation. This translation is provided for information purposes only and has no legal force. Ordinance on Collective Investment Schemes (Collective Investment Schemes Ordinance, CISO) of 22 November 2006 (Status as of 1 January 2015) The Swiss Federal Council, based on the Federal Act of 23 June on Collective Investment Schemes (CISA; referred to below as: the Act), decrees: Title 1 Chapter 1 General Provisions Object and Scope Art. 1 2 Qualified investors under foreign law (Art. 2 para. 1 let. e CISA) The following are deemed qualified investors under foreign law pursuant to Article 2 paragraph 1 letter e of the Act: a. institutional investors with professional treasury operations, specifically including regulated financial intermediaries and insurance institutions, public entities, retirement benefits institutions and companies with professional treasury operations; b. high-net-worth individuals who at the time of purchase meet requirements that are comparable to those of Article 6; c. private individuals who have concluded a discretionary management agreement with a regulated financial intermediary that purchases units of collective investment schemes for their account. Art. 1a 3 Investment club (Art. 2 para. 2 let. f CISA) Irrespective of its legal status, an investment club must meet the following requirements: AS SR Inserted by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Originally Art. 1 1

2 Credit a. The membership rights are set out in the relevant constitutive document for its chosen legal status. b. The members or a section of the members take the investment decisions. c. The members are informed about the status of the investments on a regular basis. d. The number of members does not exceed twenty. Art. 1b 4 Non-subject asset managers of collective investment schemes (Art. 2 para. 2 let. h CISA) 1 The following principles apply to calculation of the thresholds of the assets managed by the asset manager of collective investment schemes pursuant to Article 2 paragraph 2 letter h numbers 1 and 2 of the Act: a. Assets managed include all Swiss and foreign collective investment schemes managed by the same asset manager of collective investment schemes irrespective of whether it manages them directly or via delegation or via a company with which it is connected: 1. via a single management; via 2. a relationship of common control; or 3. via a significant direct or indirect interest. b. The value is calculated on at least a quarterly basis, under due consideration of any leverage effect. c. For collective investment schemes that were established more than 12 months previously, the threshold may be calculated on the basis of the average value of the assets over the last four quarters. d. The value of the collective investment schemes pursuant to Article 2 paragraph 2 letter h number 2 of the Act is calculated on the basis of the capital commitments or nominal value of the collective investment vehicles concerned, provided the price of the investments underlying such vehicles is not obtained through trading on a regulated market. 2 FINMA regulates the details for calculating the assets and the leverage effect in accordance with paragraph 1. 3 Where an asset manager of collective investment schemes exceeds a threshold as defined in Article 2 paragraph 2 letter h numbers 1 and 2 of the Act, it shall notify FINMA to that effect within 10 days and submit to the latter an application for approval pursuant to Article 14 et seq. of the Act within 90 days. 4 Irrespective of their legal status, public or private companies that are connected to one another through an economic unit are deemed to be group companies of the group of companies pursuant to Article 2 paragraph 2 letter h number 3 of the Act. 4 Inserted by No I of the Ordinance of 13 Feb. 2013, in force since 1 March

3 Collective Investment Schemes Ordinance Companies constitute an economic unit when one company directly or indirectly holds more than half the voting rights or capital of the other, or controls it in any other way. Art. 1c 5 Voluntary submission (Art. 2 para. 2bis CISA) 1 An asset manager of collective investment schemes as defined in Article 2 paragraph 2 letter h of the Act may submit an application for authorisation to FINMA in accordance with Article 14 et seq. of the Act if it: a. has its registered office in Switzerland; and b. Swiss or applicable foreign law provides that the asset management of collective investment schemes may only be delegated to a regulated asset manager of collective investment schemes. 2 It must meet the same conditions of authorisation as the asset manager of collective investment schemes that is required to obtain authorisation. Art. 2 Investment company (Art. 2 para. 3 CISA) Newly established investment companies whose issue prospectus provides for a listing on a Swiss exchange are treated as equivalent to listed companies provided listing is completed within one year. Art. 3 6 Distribution (Art. 3 CISA) 1 The offering of collective investment schemes or advertising for collective investment schemes includes any type of activity whose object is the purchase of units of collective investment schemes by an investor. 2 At the instigation of or on the own initiative of investors pursuant to Article 3 paragraph 2 letter a of the Act, information is provided or collective investment schemes subscribed when: a. the information is issued in the context of advisory agreements as defined in paragraph 3 or the collective investment schemes are subscribed in the context of such agreements; b. the investor requests information or purchases units of a specific collective investment scheme without prior action or contact, specifically of the asset manager of collective investment schemes, distributor or representative. 3 Advisory agreements pursuant to Article 3 paragraph 2 letter a of the Act are agreements that: 5 Inserted by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March

4 Credit a. are aimed at a long-term advisory relationship in return for a fee; and b. are concluded in writing with a regulated financial intermediary as defined in Article 10 paragraph 3 letter a of the Act or with an independent asset manager in accordance with Article 3 paragraph 2 letter c of the Act. 4 Offerings of collective investment schemes and advertising for collective investment schemes that are exclusively reserved for investors pursuant to Article 10 paragraph 3 let. a and b of the Act must not be accessible to the other qualified and non-qualified investors. 5 The publication of prices, net asset values and tax data by regulated financial intermediaries is not deemed distribution unless such announcements contain contact information. 6 Employee share participation schemes pursuant to Article 3 paragraph 2 letter e of the Act must: a. constitute a direct or indirect investment in the employer s company or in another company that by way of a majority of the votes or in any other way brings the company together with the employer s company under a single management (group); b. be directed at employees: 1. who are not serving a period of notice at the time of the offering, 2. for whom the employee participation plan is a component of the salary. 7 In the case of structured products, paragraphs 4 and 5 apply mutatis mutandis. Art. 4 Structured products (Art. 5 CISA) 1 A structured product may only be distributed to non-qualified investors in or from Switzerland if it: a. is issued, guaranteed or secured in an equivalent manner by a financial intermediary pursuant to Article 5 paragraph 1 let. a numbers 1 3 of the Act; b. is issued, guaranteed or secured in an equivalent manner by a regulated financial intermediary pursuant to Article 5 paragraph 1 let. a number 4 of the Act which has a branch in Switzerland, unless the structured product is listed on a Swiss stock exchange that ensures transparency as provided for in paragraph 2 and Article 5 paragraph 2 of the Act. 7 1bis In particular, the following are deemed to be equivalent collateral pursuant to Article 5 paragraph 1 and paragraph 1 bis of the Act: a. any legally enforceable assurance from a regulated financial intermediary pursuant to Article 5 paragraph 1 letter a of the Act: 1. to guarantee the performance obligations of the issuer of a structured product, 7 Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March

5 Collective Investment Schemes Ordinance to provide the issuer with financial resources such that it is able to satisfy the claims of the investors; or b. the provision of legally enforceable physical security held in Switzerland in favour of the investors. 8 1ter A special purpose entity is a legal person whose exclusive purpose is the issuing of structured products and whose assets may only be used in the interests of the investors. 9 2 Where a structured product is not issued, guaranteed or secured in an equivalent manner by a regulated financial intermediary pursuant to Article 5 paragraph 1 of the Act, attention must explicitly be drawn thereto in the simplified prospectus The financial intermediaries specified in Article 5 paragraph 1a of the Act shall formalize the requirements for the simplified prospectus through a system of selfregulation. This shall be approved by the Swiss Financial Market Supervisory Authority (FINMA) The requirement to produce a simplified prospectus does not apply where the structured product: a. is listed on a Swiss exchange, thereby ensuring transparency pursuant to paragraph 2 and Article 5 paragraph 2 of the Act or b. 12 is not distributed in Switzerland but from Switzerland to non-qualified investors and transparency is assured by virtue of foreign regulations pursuant to Article 5 paragraph 2 of the Act. 5 The provisional simplified prospectus must denote that the information is only indicative and refer investors to the issue date of the definitive simplified prospectus. The requirements for the provisional simplified prospectus are based on paragraph Inserted by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Inserted by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Amended by Annex No 6 of the Financial Market Audit Act of 15 Oct. 2008, in force since 1 Jan (AS ). 12 Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Inserted by No I of the Ordinance of 13 Feb. 2013, in force since 1 March

6 Credit Chapter 2 Collective Investment Schemes Art Definition of collective investment scheme (Art. 7 para. 3 and 4 CISA) 1 Irrespective of legal status, collective investment schemes are assets provided by at least two mutually independent investors for the purpose of collective investment and which are managed externally. 2 Investors are mutually independent when they provide assets that are mutually independent in legal and de facto terms. 3 For group companies in the same group of companies pursuant to Article 1b paragraph 4, the requirement for the assets to be independent pursuant to paragraph 2 does not apply. 4 The assets of a collective investment scheme may be provided by a single investor (single investor fund) where such investor is an investor pursuant to Article 10 paragraph 3 letter b or c of the Act. 5 The restriction of investor eligibility to investors as defined in paragraph 4 must be disclosed in the relevant documents pursuant to Article 15 paragraph 1 of the Act. Art Qualified investors (Art. 10 para. 3bis and 3ter CISA) 1 A high-net-worth individual pursuant to Article 10 paragraph 3 bis of the Act is any natural person who at the time of subscribing to the collective investment scheme meets one of the following conditions: a. Investors shall provide evidence that they: 1. have the knowledge required to comprehend the risks of the investments based on their individual education and professional experience or based on comparable experience in the financial sector; and 2. hold assets of at least five hundred thousand Swiss francs. b. Investors shall confirm in writing that they hold assets of at least five million Swiss francs. 2 The financial investments directly or indirectly owned by the investors are attributed to the assets pursuant to paragraph 1, specifically: a. bank credit balances at sight or on demand; b. trust funds; c. securities including collective investment schemes and structured products; d. derivatives; 14 Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March

7 Collective Investment Schemes Ordinance e. precious metals; f. life insurance policies with a surrender value. 3 Direct investments in real estate, social security entitlements and occupational pension assets are not financial investments pursuant to paragraph 2. 4 Assets pursuant to paragraph 1 letter b may comprise immovable assets of up to two million Swiss francs. Immovable assets are included at their net value. The net value is calculated on the basis of the market value less all debt associated with the immovable asset. 5 At the time of purchase, the investor must provide evidence of the assets pursuant to paragraph 1. Art. 6a 16 Written declaration (Art. 10 para. 3bis and 3ter CISA) 1 High-net-worth individuals wishing to be considered qualified investors pursuant to Article 10 paragraph 3 bis of the Act shall confirm this in writing. If a private investment structure is set up for one or more high net-worth individuals, confirmation may be provided by a person responsible for managing the investment structure provided he or she is authorised to do so by the investment structure The financial intermediary and the independent asset manager shall: a. notify the investors pursuant to Article 10 paragraph 3 ter of the Act that they are deemed a qualified investor; b. explain the associated risks to them; and c. refer them to the opportunity to be able to explain in writing that they do not wish to be deemed a qualified investor Chapter 3 Section 1 Authorisation and Approval General Art. 7 Authorisation documentation (Art. 13 and 14 CISA) Any party applying for authorisation under Article 13 of the Act must submit the following documents to FINMA: a. the articles of association and the organisational regulations in the case of a fund management company, a SICAV and a SICAF; b. the company agreement in the case of a limited partnership for collective investment; 16 Inserted by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Amended by Annex No 3 of the Financial Market Audit Ordinance of 5 Nov. 2014, in force since 1 Jan (AS ). 7

8 Credit c. the relevant organisational documents in the case of an asset manager, a representative of foreign collective investment schemes and a distributor. Art. 8 Exemption from the authorisation requirement 18 (Art. 13 para. 3 CISA) 1 Any party authorised as a bank pursuant to the Federal Act on Banks and Savings Institutions of November 8, , as a securities trader pursuant to the Stock Exchange Act of March 24, or as an insurance institution pursuant to the Federal Act on the Supervision of Insurance Companies of December 17, , is exempted from the duty to obtain authorisation for asset managers of collective investment schemes and distributors. 22 1bis Any party authorised as a fund management company is exempted from the duty to obtain authorisation for asset managers of collective investment schemes, distributors and representatives of foreign collective investment schemes Any party authorised as an asset manager of collective investment schemes is exempted from the duty to obtain authorisation for distributors Representatives of foreign collective investment schemes are exempted from the duty to obtain authorisation for distributors Agents of insurance institutions which are integrated legally and de facto into the organisation of the insurance institution on a legal or constructive basis by virtue of the agency agreement are not subject to the duty to obtain authorisation for distributors. FINMA regulates the details. Art Art. 10 Good reputation, guarantees and specialist qualifications (Art. 14 para. 1 let. a CISA) 1 The persons responsible for the management and business operations shall be suitably qualified for the intended activity on the basis of their education and training, experience and career history. 18 Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March SR SR SR Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Inserted by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Repealed by No I of the Ordinance of 13 Feb. 2013, with effect from 1 March

9 Collective Investment Schemes Ordinance FINMA determines the requirements for furnishing evidence of good reputation, the guaranteeing of proper management and the possession of the requisite specialist qualifications. 3 In assessing these requirements, it also takes account of the intended activity on behalf of the licensee, together with the nature of the intended investments. 4 In justified individual instances, it may grant derogations from these requirements. Art. 11 Significant equity holders (Art. 14 para. 1b and para. 3 CISA) FINMA specifies the requirements for the furnishing of evidence of the good reputation of significant equity holders. Furthermore, it specifies the requirements for the furnishing of evidence that such significant equity holders cannot exert their influence to the detriment of prudent and sound business practice. Art. 12 Organisational structure (Art. 14 para. 1 let. c CISA) 1 The executive board must comprise at least two persons. These persons must have their place of residence at a location which is suitable for the proper managing of the business operations. 2 The authorised signatories of the licensee must sign jointly. 3 The licensee must define its organisational structure in a set of organisational regulations It must employ personnel who are properly and suitably qualified for its activity. 5 FINMA may require that an internal audit be performed if required by the scope and nature of the activity. 6 In justified instances, it may grant derogations from these requirements. Art. 12a 28 Risk management, internal control system and compliance (Art. 14 para. 1ter CISA) 1 The licensee must ensure it has proper and appropriate risk management, an internal control system (ICS) and compliance covering its entire business activities. 2 Risk management must be organised so that all material risks can be adequately identified, assessed, controlled and monitored. 3 The licensee shall separate the functions of risk management, the internal control system and compliance in functional and hierarchical terms from the operating units, in particular from the investment decisions function (portfolio management). 4 FINMA may grant derogations from these requirements in justified instances. 27 Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Inserted by No I of the Ordinance of 13 Feb. 2013, in force since 1 March

10 Credit Art. 13 Financial guarantees (Art. 14 para. 1 let. d. CISA) The licensee has sufficient financial guarantees if it meets the relevant provisions regarding the minimum capital or minimum investment amount. Art. 13a 29 Documents of foreign collective investment schemes (Art. 15 para. 1 let. e CISA) For foreign collective investment schemes, the following documents must be submitted to FINMA for approval: a. the prospectus; b. the simplified prospectus or key investor information document; c. the collective investment agreement for the contractual collective investment schemes; d. the articles of association and the investment regulations or the company agreement of collective investment schemes organised under company law; e. other documents that would be necessary for approval under applicable foreign laws and those for Swiss collective investment schemes in accordance with Article 15 paragraph 1 of the Act. Art. 14 Change of organisational structure and documents (Art. 16 CISA) 1 In the event of changes to the organisational structure, authorisation must be obtained from FINMA. The documents defined in Article 7 must be submitted to FINMA. 2 Changes to documents in accordance with Article 15 of the Act must be submitted to FINMA, with the exception of: a. the relevant documents of foreign collective investment schemes; b. any change in the total limited partners' contributions in the company agreement of the limited partnership for collective investment. c. 30 changes to documents requiring approval in the case of a domestic collective investment scheme where such documents relate exclusively to provisions on sales and distribution restrictions and are required in the context of foreign laws, international treaties, bilateral or supervisory arrangements, etc. Art. 15 Duty to report (Art. 16 CISA) 1 The licensees, with the exception of the custodian bank, shall report: 29 Inserted by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Inserted by No I of the Ordinance of 13 Feb. 2013, in force since 1 March

11 Collective Investment Schemes Ordinance a. any change in the persons responsible for the management and the business operations; b. facts which might call into question the good reputation or the guaranteeing of proper management by the persons responsible for the management and the business operations, specifically the instigation of criminal proceedings against them; c. any change in significant equity holders, except for company shareholders in a SICAV and limited partners in a limited partnership for collective investment; d. facts which might call into question the good reputation of significant equity holders, specifically the instigation of criminal proceedings against them; e. facts which call into question the prudent and sound business practice of the licensees owing to the influence of the significant equity holders; f. any change with respect to the financial guarantees (Art. 13), in particular if the minimum requirements are no longer met. 2 The custodian bank shall report any change of executive persons entrusted with the performance of the custodian bank's duties (Art. 72 para. 2 CISA). 3 Furthermore, amendments to the prospectus, simplified prospectus or key investor information document of an investment fund, SICAV, limited partnership for collective investment and SICAF must also be reported 31 4 The representatives of foreign collective investment schemes that are not exclusively distributed to qualified investors must report 32 a. 33 measures taken by a foreign supervisory authority against the collective investment scheme, specifically its withdrawal of approval; b. 34 changes to the documents for foreign collective investment schemes in accordance with Article 13a; c The report must be made immediately to FINMA, which shall establish whether the reported facts comply with the Act. 31 Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Amended by Annex No 6 of the Financial Market Audit Act of 15 Oct. 2008, in force since 1 Jan (AS ). 34 Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Repealed by No I of the Ordinance of 13 Feb. 2013, with effect from 1 March

12 Credit Art. 16 Requirements for the simplified approval procedure (Art. 17 CISA) 1 The simplified approval procedure may only be adopted where the fund regulations: a. comply with a format which FINMA has recognised as being the minimum standard, such as model regulations and prospectuses of a specific industry body; or b. comply with a set of standards which FINMA has recognised as binding in relation to the relevant licensee. 2 FINMA shall give the applicant confirmation of its receipt of the application. 3 Where additional information is required for the purpose of assessing the application, FINMA may instruct the applicant to submit such information at a subsequent time. Art. 17 Time limits for the simplified approval procedure (Art. 17 CISA) 1 Open-ended collective investment schemes for qualified investors are deemed to have been approved on expiry of the following time limits: a. securities funds, real estate funds and other funds for traditional investments: following receipt of the application; b. other funds for alternative investments: four weeks following receipt of the application. 2 FINMA shall approve open-ended collective investment schemes which are directed towards the public at the latest within the following time limits: a. securities funds: four weeks following receipt of the application; b. real estate funds and other funds for traditional investments: six weeks following receipt of the application; c. other funds for alternative investments: eight weeks following receipt of the application. 3 The period begins one day following receipt of the application. 4 Where FINMA requires further information, the commencement of the period must be postponed from the time the request is made until such time as the information is received by FINMA. Art. 18 Subsequent amendment of documents (Art. 17 CISA) 1 FINMA may demand that a subsequent amendment be made to the documents for collective investment schemes for qualified investors for a period of up to three months following simplified approval. 2 The investors must: 12

13 Collective Investment Schemes Ordinance a. be made aware of the possibility of an amendment in advance; b. be informed of subsequent amendments in the media of publication. Section 2 Conditions of Authorisation for Asset Managers of Collective Investment Schemes Organised under Swiss Law 36 Art Minimum capital and furnishing of collateral (Art. 14 para. 1 let. d CISA) 1 The minimum capital of asset managers of collective investment schemes that exclusively perform duties pursuant to Article 18a paragraphs 1, 2 and 3 letters b d of the Act amounts to 200,000 Swiss francs and is paid up in cash. 2 The minimum capital of asset managers of collective investment schemes that conduct investment fund business for foreign collective investment schemes pursuant to Article 18a paragraph 3 letter a of the Act amounts to 500,000 Swiss francs and is paid up in cash. 3 In place of the minimum capital, FINMA may permit partnerships to provide collateral, specifically a bank guarantee or cash deposit on a blocked account held with a bank and which equates to the minimum capital pursuant to paragraphs 1 and 2. 4 In justified individual instances, it may stipulate an alternative minimum amount. 5 The minimum capital must be maintained at all times. Art. 20 Components of capital (Art. 14 para. 1d and 18 para. 3 CISA) 38 1 In the case of a company limited by shares and a partnership limited by shares, the capital is the share and participation capital, and in the case of a limited liability company it is the issued capital. 2 In the case of partnerships, the capital is: 39 a. the capital accounts; b. the partnership contributions; and c. the assets of the partners with unlimited liability. 36 Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March

14 Credit 3 The capital accounts and assets of the partners with unlimited liability may only be ascribed to the capital if an irrevocable written declaration deposited with a licensed audit company provides evidence that: 40 a. in the event of liquidation, bankruptcy or administration proceedings such assets shall be subordinate to the claims of all other creditors; and b. the asset manager of collective investment schemes is obliged: net such assets with its own claims nor secure them from its own assets, 2. reduce any of the components of the capital as defined in paragraph 2 letters a and c to the extent that the minimum capital is no longer maintained without the prior consent of the audit company. Art Level of capital adequacy (Art. 14 para. 1 let. d. CISA) 1 The required capital amounts to: a percent of the total assets of the collective investment schemes managed by the asset manager exceeding 250 million Swiss francs; b. at all times at least one quarter of the fixed costs in accordance with the most recent annual financial statement; and c. no more than 20 million Swiss francs. 2 The following are fixed costs: a. personnel expenses; b. operating expenses (overheads); c. depreciation of investment assets; d. expense for allowances, provisions and losses. 3 Asset managers of collective investment schemes must also: a. hold additional capital of 0.01 percent of the total assets of the collective investment schemes managed by the asset manager of the collective investment schemes; or b. conclude professional indemnity insurance. FINMA regulates the details. 4 The portion of personnel expenses which are exclusively dependent on the business result or in relation to which no legal entitlement exists is deductible under paragraph 2 letter a. 5 The prescribed capital adequacy must be maintained at all times. 40 Amended by Annex No 3 of the Financial Market Audit Ordinance of 5 Nov. 2014, in force since 1 Jan (AS ). 41 Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March

15 Collective Investment Schemes Ordinance Asset managers of collective investment schemes shall notify FINMA of capital inadequacy immediately. 7 In justified instances, FINMA may grant a relaxation. Art. 22 Qualifying capital (Art. 14 para. 1 let. d. CISA) 1 Legal entities may include the following in qualifying capital: a. the paid-up share and participation capital in the case of a company limited by shares and partnership limited by shares, and the issued capital in the case of a limited liability company; b. the general statutory reserve and other reserves; c. retained earnings; d. the net profit for the current financial year after deducting the estimated earnings distribution, provided an audited interim financial statement including full income statement is available; e. hidden reserves, provided they are assigned to a separate account and designated as own funds. Their allowability must be confirmed in the audit report Partnerships may include the following in qualifying capital: 44 a. the capital accounts; b. the partnership contributions; c. the collateral as defined in Article 19 paragraph 2; d. the funds of the partners with unlimited liability, provided the conditions stated in Article 20 paragraph 3 are met. 3 For asset managers of collective investment schemes, any loans granted to them including bonds with a maturity of at least five years may be included in qualifying capital if an irrevocable written declaration deposited with a licensed audit company provides evidence that: 45 a. in the event of liquidation, bankruptcy or administration proceedings such loans are subordinate to the claims of all other creditors; and b. they have committed themselves not to net the loans with their claims nor secure them from their own assets. 4 The qualifying capital as defined in paragraphs 1 and 2 letters a d must account for at least 50 percent of the total required. 43 Expression in accordance with Annex No 6 of the Financial Market Audit Act of 15 Oct. 2008, in force since 1 Jan (AS ). 44 Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Amended by Annex No 3 of the Financial Market Audit Ordinance of 5 Nov. 2014, in force since 1 Jan (AS ). 15

16 Credit Art. 23 Deductions in relation to the calculation of qualifying capital (Art. 14 para. 1 let. d. CISA) The following shall be deducted when calculating capital adequacy: a. the loss carried forward and the loss for the current financial year; b. any unsecured allowance and provision for the current financial year; c. in the case of loans, repayment of the original nominal amount of 20 percent per year for the last five years in accordance with Article 22 paragraph 3; d. intangible assets (including start-up and organisational costs as well as goodwill) with the exception of software; e. in the case of a company limited by shares and partnership limited by shares, the shares which they hold in the company at their own risk; f. in the case of a limited liability company, the capital contribution which it holds in the company at its own risk; g. the carrying amount of investments, unless a consolidation is performed in accordance with Article 29. Art. 24 Description of the area of business (Art. 14 para. 1 let. c CISA) 46 1 Asset managers of collective investment schemes must describe their area of business in factually and geographically precise terms in the articles of association, company agreements or organisational regulations Where they wish to operate a subsidiary, a branch or a representative office abroad, they shall provide FINMA with all the information it requires for the assessment of the duties, specifically: a. name and address of the subsidiary, branch or representative office; b. the names of the persons entrusted with the management and the business operations; c. the audit company 48 ; d. name and address of the supervisory authority in the foreign country of domicile. 3 They shall notify FINMA immediately of any material change in relation to their subsidiaries, branches or representative offices abroad. 46 Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Term in accordance with Annex No 6 of the Financial Market Audit Ordinance of 15 Oct. 2008, in force since 1 Jan (AS ). This amendment has been made throughout the text. 16

17 Collective Investment Schemes Ordinance Art. 24a 49 Duties (Art. 18a CISA) Asset managers of collective investment schemes may in addition to their duties pursuant to Article 18a of the Act specifically perform services and administrative activities such as the acceptance and transmission of orders involving financial instruments in the name of and for the account of clients. Art Agreement (Art. 14 para. 1 let. c CISA) Asset managers of collective investment schemes must conclude a written agreement with their clients that governs the rights and obligations of the parties and other material matters. Art Delegation of activities (Art. 18b CISA) Asset managers of collective investment schemes that conduct portfolio management and risk management for collective investment schemes may not delegate such duties to other companies whose interests may conflict with those of the investor or the asset manager of collective investment schemes. Art Standards of industry bodies (Art. 14 para. 2 CISA) FINMA may make its granting of authorisation dependent on the asset manager of collective investment schemes complying with the code of conduct of a specific industry body. Art Accounting (Art. 14 para. 1ter CISA) 1 Asset managers of collective investment schemes are subject to the accounting regulations of the Code of Obligations (CO) Where the asset managers of collective investment schemes are subject to specific, more stringent accounting standards, such regulations take precedence. 49 Inserted by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March SR 220. Now: Art. 957 ff. OR. 55 Amended by Annex 2 No 3 of the Banking Ordinance of 30 April 2014, in force since 1 Jan (AS ). 17

18 Credit Art Section 2a 57 Conditions of Authorisation for Asset Managers of Collective Investment Schemes Organised under Foreign Law Art. 29a Foreign asset managers of collective investment schemes (Art. 18 para. 1 let. c CISA) 1 Any company established under foreign law is deemed to be a foreign asset manager of collective investment schemes if it: a. is authorised as an asset manager of collective investment schemes abroad; b. uses the term «asset manager of collective investment schemes», or an expression that indicates that it conducts asset management of collective investment schemes, in its name, in the designation of its objects or in its business documents; or c. conducts asset management in accordance with the legislation on collective investment schemes. 2 If the foreign asset manager of collective investment schemes is actually managed in Switzerland or conducts its business largely or exclusively in or from Switzerland, it shall be organised in accordance with Swiss law. In addition, it is subject to the provisions for domestic asset managers of collective investment schemes. Art. 29b Duty to obtain authorisation and conditions of authorisation (Art. 2 para. 1 let. c, 13 para. 2 let. f, 14 and 18 CISA) 1 A foreign asset manager of collective investment schemes requires FINMA authorisation if it employs persons in Switzerland that conduct asset management on its behalf on a permanent, commercial basis in or from Switzerland in accordance with the legislation on collective investment schemes (branch). 2 FINMA grants the foreign asset manager of collective investment schemes authorisation to establish a branch if: a. it is sufficiently organised and has adequate financial resources and qualified personnel to operate a branch in Switzerland; b. it is subject to an appropriate supervisory body that also covers the branch; c. the foreign supervisory authorities responsible do not raise any objections to the establishment of a branch; d. the foreign supervisory authorities responsible have concluded an agreement on cooperation and exchange of information with FINMA; 56 Repealed by No I of the Ordinance of 13 Feb. 2013, with effect from 1 March Inserted by No I of the Ordinance of 13 Feb. 2013, in force since 1 March

19 Collective Investment Schemes Ordinance e. the foreign supervisory authorities responsible undertake to notify FINMA immediately if circumstances occur that could seriously jeopardise the interests of the clients, their assets or the collective investment schemes it manages; f. the branch meets the conditions of authorisation pursuant to Article 14 paragraph 1 let. a c and 2 of the Act in addition to Article 10 et seq. of the present Ordinance and possesses a set of rules which provide a clear definition of the scope of business and establish an adequate organisational structure corresponding to the business activities; and g. the foreign asset manager of collective investment schemes provides evidence that the name of the branch may be entered in the Commercial Register. 3 If the foreign asset manager of collective investment schemes constitutes an element of a group operating in the financial sector, FINMA may, subject to Article 18 paragraph 2 of the Act, make authorisation dependent on the condition that the former is subject to appropriate consolidated supervision by the foreign supervisory authorities responsible. 4 FINMA may require the branch to provide collateral if necessary for the protection of clients. 5 The foreign asset manager of collective investment schemes may only register the branch for entry in the Commercial Register if FINMA has granted it authorisation for the branch to be established. Art. 29c Branches (Art. 18 para. 1 let. c CISA) 1 Where a foreign asset manager of collective investment schemes establishes two or more branches in Switzerland, it shall: a. obtain authorisation for each of them; b. designate one of them as being responsible for relationships with FINMA. 2 Such branches shall meet the requirements of the Act and the present Ordinance on a combined basis. An audit report is sufficient. Art. 29d Annual accounts and interim accounts of the branch 1 The branch may prepare its annual accounts and interim accounts in accordance with the provisions applicable to the foreign asset manager of collective investment schemes provided they satisfy international standards on financial reporting. 2 The following claims and obligations are presented separately: a. those in relation to the foreign asset manager of collective investment schemes; b. those in relation to the companies operating in the financial sector or real estate companies where: 19

20 Credit 1. the foreign asset manager of collective investment schemes forms an economic entity with them, or 2. it is assumed that the foreign asset manager of collective investment schemes is legally bound or de facto obligated to provide assistance to such company. 3 Paragraph 2 also applies to off-balance-sheet exposures. 4 The branch submits its annual accounts and interim accounts to FINMA. Publication is not required. Art. 29e 58 Audit report 1 The audit company prepares its report in one of the official languages of Switzerland and sends it to FINMA. The manager of the branch receives a copy. 2 The branch forwards the copy of the audit report to the unit of the foreign asset manager of collective investment schemes that is responsible for the business activities of the branch. Art. 29f Closure of a branch The foreign asset manager of collective investment schemes obtains FINMA s authorisation prior to the closure of a branch. Section 3 Conditions of Authorisation for Distributors Art. 30 Authorisation conditions (Art. 3 and 19 para. 2 CISA) 1 FINMA shall grant authorisation to a natural person who wishes to distribute units of a collective investment scheme where that person can provide evidence of: 59 a. the conclusion of professional indemnity insurance appropriate to his or her business activities amounting to at least 250,000 Swiss francs, covering his or her activity as a distributor, or the depositing of an appropriate deposit of the same amount; b. permitted procedural details in relation to distribution; and c. a written distribution agreement with the fund management company, the SICAV, the limited partnership for collective investment or the SICAF, or the representative of a foreign collective investment scheme, under which agreement the person is expressly prohibited from receiving payments for the purchase of units. 58 Amended by Annex No 3 of the Financial Market Audit Ordinance of 5 Nov. 2014, in force since 1 Jan (AS ). 59 Amended by No I of the Ordinance of 13 Feb. 2013, in force since 1 March

21 Collective Investment Schemes Ordinance It shall grant authorisation to legal persons and competent partnerships if they or the persons holding executive powers meet the requirements stated in paragraph 1. 3 It may also make its granting of authorisation dependent on the distributor's compliance with the relevant standards of a specific industry body. Art. 30a 60 Distribution by financial intermediaries (Art. 19 para. 1bis CISA) 1 A financial intermediary may distribute foreign collective investment schemes to qualified investors in Switzerland provided it is admitted for distribution of collective investment schemes in its country of domicile and concludes a written distribution agreement with a representative pursuant to Article 131a to which Swiss law is applicable. 2 The distribution agreement commits the financial intermediary to exclusively using fund documents that indicate the representative, paying agent and place of jurisdiction. Chapter 4 Code of Conduct Art. 31 Duty of loyalty: (Art. 20 para. 1 let. a CISA) 1 The licensees and their agents may only purchase investments from collective investment schemes for their own account at the market price and may only sell such investments from their own portfolios at the market price. 2 In relation to services delegated to third parties they shall waive the compensation owed to them in accordance with the fund regulations, company agreement, investment regulations or discretionary management agreement where such compensation is not used for payment of the services rendered by such third parties. 3 Where investments of a collective investment scheme are transferred to another scheme of the same licensee or a scheme belonging to a related licensee, no costs may be levied. 4 The licensees may not levy any issue or redemption fees if they purchase target funds which: a. they manage themselves either directly or indirectly; or b. are managed by a company to which they are related by virtue of: 1. common management, 2. control, or 3. a significant direct or indirect interest Inserted by No I of the Ordinance of 13 Feb. 2013, in force since 1 March Amended by No I of the Ordinance of 28. Jan. 2009, in force since 1 March 2009 (AS ). 21

22 Credit 5 When a management fee is levied on investments in target funds pursuant to paragraph 4, Article 73 paragraph 4 applies accordingly FINMA regulates the details. It may declare that paragraph 4 and 5 also applies to other products. 63 Art. 32 Special duty of loyalty in relation to real estate investments (Art. 20 para. 1 let. a, 21 para. 3 and 63 CISA) 1 The fees payable to closely related natural or legal persons which participate in the planning, construction, purchasing or sale of a building for the account of the collective investment scheme shall be calculated by the licensees exclusively on the basis of the normal prices prevailing in the sector. 2 The valuation expert shall check the fee invoice prior to settlement thereof and if necessary furnish the licensee and the audit company with a report. 3 Where real estate investments of a collective investment scheme are transferred to another scheme of the same licensee or a related licensee, no compensation may be levied for buying and selling work undertaken. 4 Payments by real estate companies to their directors, executives and personnel shall be included in the compensation to which the fund management company and the SICAV are entitled in accordance with the fund regulations. Art. 32a 64 Exceptions to the ban on transactions with closely connected persons (Art. 63 para. 3 and 4 CISA) 1 Pursuant to Article 63 paragraph 4 of the Act, FINMA may in justified individual cases grant an exemption from the ban on transactions with closely related persons pursuant to Article 63 paragraphs 2 and 3 of the Act if: a. the relevant documents of the collective investment scheme provide for such a possibility; b. the exemption is in the interests of the investors; c. in addition to the valuation by the regular valuation experts for the real estate fund, a valuation expert who is independent of such experts or their employer and of the fund management company or SICAV as well as the custodian bank of the real estate fund pursuant to Article 64 paragraph 1 of the Act confirms the market conformity of the purchase and sale price for the property and of the transaction costs. 2 Following conclusion of the transaction, the fund management company or SICAV prepares a report containing the following: 62 Amended by No I of the Ordinance of 28. Jan. 2009, in force since 1 March 2009 (AS ). 63 Inserted by No I of the Ordinance of 28. Jan. 2009, in force since 1 March 2009 (AS ). 64 Inserted by No I of the Ordinance of 13 Feb. 2013, in force since 1 March

23 Collective Investment Schemes Ordinance a. information on the individual properties acquired or transferred and their value on the date of acquisition or transfer; b. the valuation reports by the regular valuation experts; c. the report on the market conformity of the purchase or sales price by the valuation experts pursuant to paragraph 1 lit. c. 3 As part of its audit of the fund management company or SICAV, the audit company confirms adherence to the special duty of loyalty in relation to real estate investments; 4 The approved transactions with closely related persons are mentioned in the annual report of the collective investment scheme. 5 In the case of real estate investments where the fund management company, SICAV or persons closely related thereto commissioned construction projects, FINMA may not grant any exemptions from the prohibition of transactions with closely related persons. Art. 32b 65 Conflicts of interest (Art. 20 para. 1 let. a CISA) The licensees must take effective organisational and administrative measures to identify, prevent, settle and monitor conflicts of interest in order to prevent the latter from harming the interests of the investors. Where conflicts of interest cannot be avoided, they shall be disclosed to the investors. Art. 33 Due diligence (Art. 20 para. 1 let. b CISA) 1 The licensees shall ensure the effective separation of the activities of decisionmaking (asset management), implementation (trading and settlement) and administration. 2 FINMA may in justified individual instances permit exemptions or order the separation of additional functions. Art. 34 Duty of disclosure (Art. 20 para. 1 let. c and 23 CISA) 1 The licensees shall draw investors' attention to the risks associated with a specific type of investing in particular. 2 They shall disclose all costs incurred on the issue and redemption of units and in the administration of the collective investment scheme. In addition, they shall disclose the manner in which the management fee is used and the levying of any performance fee. 65 Inserted by No I of the Ordinance of 13 Feb. 2013, in force since 1 March